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SCALE Payer and Regulatory Research Policy Updates: February 14, 2024

Margaret Braxton

Managing Director,
Payer Strategy and Regulatory Research

February 2024

CMS Announces MA Rate Notice and Implementation of Medicare Part D Changes

  • On January 31, CMS released the yearly summary of payment and policy updates to Medicare Advantage (MA) for calendar year 2025. CMS estimates the total impact with a revenue increase of 3.7% which is offset by a 3.9% risk coding adjustment. The yearover-year growth rates for MA benchmarks are determined by Medicare fee-for-service per capita costs and will now include medical education costs. CMS also measures the increase in MA risk scores for patients which determine per member per month payments, and the change in star ratings from 2024. The change in how risk scores are calculated was restructured last year to prevent upcoding and overpayments. After
    pushback from MA plans on the new methodology, CMS increased the net revenue on MA plans for 2025 resulting in decrease of 0.2%. CMS will phase in these methodology changes over the next 3 years to help ease the transition for plans. Finally, the rule addressed the growing use of algorithms and artificial intelligence in utilization management decisions. CMS clarified that the tools should not create or perpetuate bias in healthcare, and provided detail on their appropriate use and safeguards that should be in place. The Biden administration has put more pressure on MA plans following trends of MA enrollment growth, strong profits, and overpayments. The final
    rate notice will be released on March 1.
  • CMS is also implementing major changes to Part D based on the Inflation Reduction Act such as a $35 monthly cap on insulin cost sharing, a yearly out-of-pocket limit of $2,000, and a redesign of the drug benefit to eliminate the coverage gap. These changes will have a large impact on the affordability of prescription drugs for seniors in 2024. The program redesign will have also have wider impacts on patients and stakeholders such as improved patient adherence and new financial incentives for both MA plans and pharmaceutical companies with specialty drug portfolios.

HRSA Begins Organ Transplant System Overhaul

  • After legislation was passed in September 2023, the Health Resources and Services Administration (HRSA) under HHS recently announced steps to begin its modernization of the organ transplant system. The Organ Procurement and Transplantation Network which oversees the entire process will soon receive a new independent board of directors. HRSA is also requesting contract bids for multiple aspects of the program rather than having the organization run by a single nonprofit entity. Funding for the modernization process is still dependent on 2024 appropriations but will aim to enhance the transparency of organ donation and donor matching, health equity for patients, and outdated IT systems. The US organ transplant process has not been significantly updated since it was first designed in the 1980s. Using requests for multiple contracts will increase competition between vendors and increase the quality of services. More than 100,000 individuals are on the waiting list for organ transplants in the US and the system has dealt with persistent issues of patient inequity, system mismanagement, and lack of oversight.

CMS Finalizes Prior Authorization Rule

Commented [BG1]: I would move this to the beginning of the sentence
Commented [JA2R1]: Agreed.

  • On January 17, CMS released the final rule for Interoperability and Prior Authorization which sets requirements for Medicare Advantage, Medicaid, CHIP, Medicare fee-forservice programs, and Qualified Health Plans sold on federal facilitated exchanges. The rule requires affected payers to streamline prior authorizations to 72 hours for urgent requests and 7 days for standard services. The ruling also requires payers to list the specific reason for denials which aids in the appeal process, and public reporting requirements similar to those already in place in FFS Medicare. Another significant change is a new technology requirement for application programming interfaces which increases interoperability between providers and payers. CMS estimates the rule will save the federal government $15 billion.

Cigna to Depart from the MA Market

  • On January 31, Cigna announced that it had entered an agreement with HCSC, the parent company of Blue Cross Blue Shield, to sell its MA business for $3.7 billion. The agreement stipulates that a subsidiary of Cigna (Evernorth) will continue to provide pharmacy services to the affected MA health plans for the next 4 years after the deal is complete. Cigna is choosing to focus on its other business segments and had a merger with Humana that would have combined their MA offerings fail to materialize. Larger trends also caused pressure on the MA market in 2023 – seniors’ healthcare utilization was higher than expected which affected health plans’ medical loss ratios, and the baby
    boomer population entering Medicare has now peaked. In Cigna’s 4 th quarter earnings call in February, the company explained they are now able to focus on their employersponsored insurance plans and their Evernorth pharmacy services which provides support to other MA plans. In recent years, MA plans have seen tighter regulatory oversight from both CMS and Congress and smaller profit margins.
    Commented [BG3]: Is this referring to MA plans? if so I would clarify
    Commented [JA4R3]: Yes, added some more clarification

Other Policy News:

  • CMS announces new Innovation in Behavioral Health model integrating mental and physical health outcomes for Medicaid and Medicare beneficiaries
  • CMS publicizes Accountable Care Organization (ACO) numbers with 480 groups in the Medicare Shared Savings Program and 245 organizations in CMMI models
  • CMS releases results of the Medicare Care Choices Model offering palliative care services not normally covered by FFS Medicare
  • No Surprises Act prevented 10 million surprise bills and did not correlate with a decrease in provider networks according to recent AHIP survey
  • Lawmakers introduce bill to prohibit the use of Quality-Adjusted Life Years (QALYs) in other federal healthcare programs, a methodology already banned in Medicare decision-making

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